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Home > Cash Flow Management Best Practice > Cash Flow Best Practice for Small and Medium-Sized Enterprises

Cash Flow Management Best Practice

Cash Flow Best Practice for Small and Medium-Sized Enterprises

by Rita Herron Brown

Making It Happen

  • Create systems for budgeting, receivables, and payables to establish how healthy the business is in a financial sense. Create a cash flow statement.

  • Don’t perform work for customers that can’t be relied on to pay promptly. Share with all customers the terms of payment, including any incentives and penalties.

  • Keep a close eye on both payments the business will be required to make and payments that could be delayed or deferred because they are not essential to current business operations.

  • When the business is cash negative, don’t panic. As long as the business has predictable, reliable income from customers in the near future, a manager can access lines of credit—if he has been wise enough to establish those before they become a critical need. And when income arrives, such short-term debt should be paid down immediately.

Notes

1 “Small business economic confidence continues to slide. 2 in 3 small business owners rate economy as poor; 3 in 4 see it getting worse.” Discover Financial Services Small Business Watch, November 2008: www.discovercard.com/business/watch/2008/november.html

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Further reading

Books:

  • Forsyth, Patrick, and Frances Kay. Tough Tactics for Tough Times: How to Maintain Business Success in Difficult Economic Conditions. Philadelphia, PA: Kogan Page, 2009.
  • Jordan, Caroline Grimm. Stop the Cash Flow Roller Coaster, I Want to Get Off! What Every Small Business Owner Should Know About Cash Flow…But Most Don’t. Lincoln, NE: iUniverse, 2007.

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